That special special case 6: Bayh-Dole the enabler

There’s a good argument that the special special case has put more money into the pharmaceutical industry than would otherwise be there. The chase for such lucrative profits has in turn attracted speculators of all sorts willing to work the regulatory system to their advantage. We might imagine an environment in which federal patent policy was indifferent in the general case to the patent bubble created in biotech/pharma. In such an imagining, alternatives to monopoly control and development of research inventions might have had greater play–attacks as it were on the monopoly operating assumptions in pharma.

Research tools in biotech may have been developed with “open innovation” strategies, as similar tools have been developed in information technology. Research tools in nanotechnology may have been more broadly shared, stimulating development rather than retarding it. And development of inventions may have involved platform development prior to commercial development–that is, shared contributions from universities and industry prior to commercial competition–allow the technology to be explored, varied, characterized, and used before companies move to commercial, competitive development. For prescription drug candidates, the clinical testing might then have been an industry-wide activity rather than each test financed by (and the fate of the candidate compound determined by) a single monopoly interest.

For that matter, a different federal patent policy might have also diminished the need for the concept of the “prescription,” with all the regulatory significance that has been attached as a result of the inability of the pharmaceutical industry to establish for itself standards for quality, safety, efficacy, training, and advertising. The present alternatives to the pharmaceutical industry is a “generic” industry that deals in legacy compounds, off patent, and a “supplements” industry that attempts to avoid the regulatory requirements for drugs by limiting health claims for compounds.

Bayh-Dole’s role is to ensure that there will be no current-time competition for the development of compounds that address public health needs. Though Cuba, for instance, may develop new drugs without the practices of the special special case, Bayh-Dole ensures that such development will never happen in the United States. In that, Bayh-Dole has been wildly successful. Is this success is an appropriate (or desirable) outcome for federal patent policy? Should this success come at the expense of all other federal agency purposes, practices in all other industries, and the ownership interest in inventions by all those investigators funded by the federal government?

The Special Special Case in the Wild

We can then come back around to how the special special case becomes generalized and abstracted as if it were the only case for all inventions, by default, and anything that differs from the special special case is unfit as the basis for federal patent policy or university patent practice.

This patenting step is absolutely crucial for the commercialization of inventions. In the absence of a strong intellectual property system – specifically patents – most of those inventions will never see the light of day.

Notice how the idea that the inventions are made at universities, which are open and inventors routinely publish, is suppressed. Notice too that the only conceivable use for inventions is to “commercialize” them–turn them into products rather than anything else–not use them to advance research, not use them DIY, not use them in industry. No, inventions have to become commercial products.

The claim that patents are necessary for such commercialization does not follow–it is not true to life, and not true to logic, but for, perhaps the special special case. More:

Why is that? The answer is quite simple – the cost to develop those inventions to a marketable product are significant and in the absence of intellectual property protections that the patent system provides, no one will ever invest in the promise of an invention.

The special special case is made out to be the general case, for all inventions. First, not true in general. Many inventions–especially methods–can be practiced without much additional development cost. That’s the case with many inventions in information technology, software, circuits, research tools, and such things as cell lines–all that’s needed is publication or deposit and most anyone can use the “invention” without significant expense. The “promise of an invention” here is candy talk for “a lucrative return based on creating a monopoly position that excludes all other use.” The “investment” in the general case isn’t to justify putting an invention in a condition to be used, but rather to turn the invention into a proprietary commercial product to the exclusion of all other uses.

Said another way, how many of you would invest in a company that will spend tens to hundreds of millions of dollars on a product knowing that a competitor will be free to offer the same product at a fraction of the cost since they invested substantially less in R&D?

Put this way, the issue is not about the use of an invention, but about profiting from speculating on the stock price of a company that makes products. You’d want to buy stock in companies with monopolies, not companies that compete on other factors such as quality or availability or efficiency or–gasp–price.

So in the end, although $65 billion is invested in research at leading institutions around the country, the fruits of that labor will wither on the vine in the absence of a strong patent system.

Total nonsense. The money is not “invested.” Most of the money is gifted–donation or subvention or diverted from tuition to research administration. If we use “investment” it is as a metaphor for “subvention,” for “grant-in-aid,” for “subsidy.” It’s a twisted mind that turns such funding into an “investment” in commercial products. The “fruits” of research include training, reports, insights, discoveries, data, techniques, prototypes, and new opportunities–and none of these things depend on commercialization, patents, monopolies, or “development.” It’s simply not true, for the general case.

But within this argument you can see the special special case shine through, and it runs right back to the Public Health Service patent policy from 1963 and the pharmaceutical industry denunciation of open access to the results of medicinal chemistry research supported by the federal government. The pharmaceutical industry “withered” those results by boycotting them. Results didn’t “wither” on their own for lack of patent rights, but rather in the face of an argument against anything that would compete with the industry’s monopoly designs.

Abstracting the special special case as if it applies to all inventions makes it appear that all research outputs depend on patenting, and not just on patents to manage quality and to deal with others who would block research, but rather on patents to create a trade in monopolies, so that speculators might have better “investment” opportunities in companies that can charge monopoly prices for products in great demand (because people would otherwise suffer or die). Whatever the argument for the value of a special special case, there’s no way it is a general case. That’s just not true. A deception to try to bolster the argument for the special special case–which itself is suspect. No wonder the need to expand the claim to all inventions, all university research.

Seeking patent protection is but the start of a complex, lengthy, unpredictable and expensive process, yet it is fundamental and crucial to establishing and building value in the initial investment in basic research.

It’s true. If one fixates on the special special case for all inventions–because one has to be “uniform” in treating all inventions alike–then one does start a “complex, lengthy, unpredictable and expensive process.” One does not have to start that process. That process does not await all research results, or even all research inventions, even patentable ones, like some natural, necessary thing. That process is created by the decision to handle all inventions as if they were the special special case, as inventions that must be protected from all use in order to preserve a monopoly opportunity for speculative investment in making commercial products.

Commercial products are fine. Recovering one’s costs is also an understandable interest. But the special special case is not about these things. It is about making the pharmaceutical industry more attractive to speculative investment by the stock of pharmaceutical companies. That’s the purpose of the patent monopolies–exclude competition, keep drug prices high, keep those prices high for two decades (or more, with improvement patents). All the federal funding does is to increase the flow of compounds into this scheme of speculative investing. More horses to race, more tracks to bet at, bigger payoffs for the winners.

Bayh-Dole, as a matter of federal law, confirms this subsidy to speculators as federal policy. The result, of course, has been a wild success for the stock prices of pharmaceutical companies, which pay only a 1% charge against sales revenues to gain access to monopolies on university inventions in their areas of operation. It’s a sweet deal, even inspired if one thinks of it from the speculator’s perspective. From most any other perspective, it’s pretty corrupt all the way around. But perhaps even this sort of corruption has its place–if only as a special special case.

Bayh-Dole, Enabler of the General Special Special Case

We can debate the value of federal policy in endorsing the special special case, that inventions in the form of compounds directed at addressing pressing matters of public health should be set aside as broad monopolies on whole classes of variations and equivalents so that speculative investors can bet on share price futures of pharmaceutical companies and the proxy biotech companies competing to get bought up by pharmaceutical companies. Perhaps that all is a good thing, a volatile market where fortunes can be made or lost for individuals, companies, and pension funds, and out the other end comes a reliable stream of commercial products–expensive ones, of course, and made at the expense of exploring all the other variations and equivalents that might also have been used or developed for whatever uses, but products nonetheless.

But even if we accept this is a decent way to insert financial speculation into public health matters of concern to the federal government, it’s difficult to understand why that same effort is justified for all university inventions across all university research for all areas of use and development. Why must speculation (by university administrators, by “investors”) in monopoly commercial product development dominate all research outputs? Even if there are special cases in which such monopoly speculation in patents is justified–necessary to call forth risk capital that otherwise would not come from any other source under any other conditions–why should these special cases be treated as the general case? Why should the university default position be dual monopoly–compulsory institutional patent ownership and invention assignment to a favored monopoly partner? Why should federal patent policy by statute make endorse such a default? No way. That’s bad for research, bad for innovation, bad for inventors, bad for universities.

Whatever we might make of the argument for the special case (some inventions will only be useful if developed as commercial products with private investment from a single source, for which a monopoly is indicated) or for the special special case (inventions directed at public health needs, where investment depends on attracting speculators willing to bet on the prospects of drug candidates to become multi-billion a year products), there’s no reason for federal patent policy to make those cases into a general case, as if these special cases are necessary for innovation, as if all industry should be run like the pharmaceutical industry, as if all new things from research must be institutionally owned and sold off into such monopoly-dependent “markets.”

Furthermore, there’s no reason for university faculty or administrators to accept such a proposition, regardless of the federal position. Under the delusion of the special special case default, in the hope for a once-in-thirty-years’ “big hit” deal at any given university, 99% of the inventive work of a university gets sequestered from use, from collaborative development, from pre-competitive evaluation. It’s hard to grasp why it is that university faculty and administrators accept the dual monopoly default so readily. The open source/open innovation folks resist, of course.

Perhaps it was the claim that federal law required it, or endorsed it, or that it was successful, or only right because inventors are such little loathsome hopeless folks or perhaps because humanities faculty thought science, engineering, and medicine inventors were exploiting patents for private gain and there was poetic justice in having the university administration step in and limit their greed, or perhaps folks really believe that the only, best, first, primary, best practice way of making money from patents is this dual monopoly approach–take ownership, sell ownership–but do it in the name of public benefit. And maybe it was this claim of public benefit that carries the day–who can argue with good intentions? Perhaps it is the suppression of data and the publication of incomplete if not deceptive data regarding the performance of the dual monopoly approach.

Perhaps it is the outright fakery at universities such as Utah and Washington with regard to startups. Perhaps it is the frenzy around entrepreneurship that justifies monopolies–gosh, those entrepreneurs need monopolies! Well, perhaps they do, but they will get better monopolies if they don’t have to deal with institutional patent licenses and can get their deals directly from inventors–oh, wait, often the entrepreneurs are the inventors (as one might expect the default to be if one were using the patent system and not circumventing it).

In any event, the special special case has come to stand for the general case, and in that capacity the general case has proven attractive to university administrators, to federal administrators, and to speculative investors, and moreover has been made to appear virtuous to the public. And so we have this distorted, counter-to-history, unreasonable approach to the management of inventions made by folks at universities, sometimes in research, sometimes not, sometimes patentable, sometimes not, sometimes federally funded, sometimes not.

Perhaps, then, too the reason the dual monopoly model has succeeded (like kudzu vine, like starlings, like carp) is that it is that no one really cares what happens with university research. It’s just not that important. It doesn’t matter if inventors own or institutions own. It doesn’t matter if there are commons or monopolies. It doesn’t matter if the primary purpose is to create a betting parlor for wealthy speculators and pension funds. It doesn’t matter that drug prices are kept high in part by monopolies created and traded by university administrators. That’s the thing that haunts–that all that research and the federal gesture of funding it really doesn’t matter all that much, no matter what people say about how important it is. At best, university research shows up as another form of virtue signalling, something we expect to show we care about “new knowledge” and “innovation,” but not really something that we expect to produce anything of substance. So let whatever go to monopolies to develop commercial products to the exclusion of all other uses or forms of development, all for the benefit of speculators.

In that case, we can reduce Bayh-Dole to a law designed to promote the welfare of wealthy speculators. An arbitrary dual monopoly approach to university inventions is justified because speculation, as a matter of federal policy, is the engine that produces public benefit. Pay no attention to research curiosity, inventor initiative, collaborative development, commons, standards, or competitive company efforts. Speculation based on risky monopolies is the best form of betting around. That’s federal policy. That’s Bayh-Dole. That’s the carefully crafted scheme. That’s the effect of the special special case.